Your Guide to Binary Options and Binary Option Trading

A binary option is a fixed return option because there are only 2 possible outcomes which are fully realized at the onset of the contract
A binary option is a contract which gives the buyer (known as the owner) the right, but not the obligation, to buy an underlying asset at a fixed price within a specified time frame.
The items being traded are known as underlying assets and they could be a range of products: currencies (e.g. USD/JPY), commodities (e.g. Oil, Gold), stocks (e.g. Microsoft, Coca Cola) or indices (e.g. Nasdaq, FTSE 100). The fixed price at which the owner buys or sells at, is known as the strike price.

When trading binary options, the buyer of the option chooses whether he thinks the underlying asset will hit the strike price by the selected expiry time - this could be at the end of the nearest hour or the end of the day, week or month.

The owner places a call option on his binary option trade if he thinks that at the expiry time the option will be higher than the current price. He places a put option if he thinks that at the expiry time the option will be lower than the current price.

In this respect binary option trading is extremely flexible. The asset, expiry time and predicted asset direction can be controlled by the owner of the investment who can select each one as he desires. The only unknown factor is if the asset will expire higher or lower that its existing price.

The returns from binary option trades are set from the onset of the contract. If an option expires in-the-money then a buyer will receive between 65-71% profit on the investment amount. If an option expires out-of-the-money then with anyoption(TM), the buyer will receive a 15% payback on his initial investment. The certainty of binary option trading makes it a preferred method of trading for many investors since not only is the potential gain known from the offset, but more importantly the potential loss is fixed and they will not be called upon for cover an investment which ended out-of-the-money.

This is how trading binary options would work: Investor A invests $100 on a call option on Oil, with a 70% return rate, with an end of the day expiry time. The current rate of Oil is 65.9001. If at the end of the day the price of oil closes at 65.9002 or above, then Investor A will receive $170. If it closes at 65.9000 or below, then he will receive a $15 payback. The simplicity of binary option trading makes it an attractive and desired way of investing for many investors.

The difference with trading binary options to traditional trading is that in binary option trading, a buyer is just trading on the performance of an asset - they will not actually own the asset itself. For example, in a stock option trade in Microsoft, an investor is not literally buying Microsoft shares, but rather opening a contract on whether the shares of Microsoft will increase or decrease within a specified time period.

Due their uniqueness, binary options have several advantages.
They are easier to trade because only a sense of which direction the asset will move in is needed
There is a controlled risk which is known from the onset of the contract - the 2 possible outcomes are pre-determined and set by the buyer depending on how much he invests in the option
For a binary option trade to be profitable, the option must only move in the predicted direction - the magnitude of the move is not relevant hence it is easier to receive a payout
Binary option trading is extremely flexible, due to multiple expiry dates and times, the range of underlying assets on offer and the ability to trade online without the need for a broker
So, whether you are a investor new to the world of trading options or a old-time trader used to the traditional trading market, it is recommended to try your hand at the phenomenon that is binary option trading and see how it could work for you.


Why to Start Trade Binary Options Today

There are a number of reasons why traders new and old are turning to binary options en masse. Binaries are a relatively recent development in the world of trading. Their predecessors, digital or all or nothing options were only approved by the SEC in 2008. They have since made it to the online trading community and have changed the face of trading in only a few short years. Up until binary options made it to the Internet, online trading was a considerably more complicated affair. Online Forex trading currently has the largest share of online traders. But trading Forex has some disadvantages that Binary options negate by their very simplicity.

Firstly when trading Forex you only have access to currency pairs, this may not be a great hindrance to most traders at first but being limited to currencies alone limits the options at your disposal. Most Digital Option brokers offer trades on stocks, commodities and indices as well as currency pairs.

Having these other assets to trade upon offers advantages to binary traders. This is because they can rely on correlations between assets when trading to diversify their trades. But this is the least of the advantages that binary traders have over Forex traders. The way binary options work make them a better alternative to online Forex for a number of reasons. Firstly binary options have preset risk and reward levels, meaning that traders know before placing a trade how much they can win or lose. This means binary traders have far more control of their bankrolls than do Forex traders. Binary trades only have two possible outcomes and only two possible choices a trader need make. Either the stake will earn a certain profit (somewhere between 60 and 80 percent), or most of the amount staked will be lost. And all you need to decide on is whether the asset you are trading on will rise or fall. With Forex not only do you not have this luxury but you also purchase your currency pair for slightly more than the market price, meaning it has to rise higher for your trade to be successful, but you also have to sell it at a lower price than it is actually worth, meaning you are being put at a disadvantage at exit as well at on entry.

But binary options are not only an attractive alternative to the current status quo, their simplicity makes them far more efficient trading vehicles. Binary option is particularly handy because the trade durations are about as flexible as you can get. Traders of binary options are able to select from a number of trade expirations, from just 60 seconds to the end of the year. This flexibility is far more useful in the case of shorter term positions. The ability to precisely define how long a trade lasts is invaluable as it allows you enter trades at the right moment, profit from momentary fluctuations in price action and not be tied to the fortunes of a given asset for any longer than need be. Short expirations and preset risk structures also allow you to make money when an asset swings the other way. This eliminates the need for lengthy trading sessions, meaning you can make more in a hour of intense binary trading than you can with a day long Forex trading session.

Finally with binary options gaining a wider acceptance and different broker companies being regulated, the only real advantage that Forex had, basically an increased level of respectability, is rapidly being overturned. In trading, as in all aspects of life, the better idea prevails. Binaries make more sense, for all kinds of traders, beginners and experienced ones. Forex would do well to take a leaf out of the binary options playbook. Simplicity is key.


Are Binary Options Legitimate? Just The Facts

Are Binary Options A Scam?
It is well past time someone made the effort to clear this subject up a bit.

First off: there is no binary options scam.

Q. Why should it be obvious that brokers are not simply fleecing their clients to pad their own profit margins?

A. Because they make tons of money quite legitimately and risking that position for a few more dollars would be quite foolish. Banks and brokerages may be many things but foolish is not one of them I assure you (generally speaking that is...see 2008 financial collapse as a counter-example).
The historical use of binary options trading should also be a clue for us that they are in fact not a scam. Institutional investors and investment banks have been trading these instruments for decades now. Binaries are not new or a scam they are simply "new" to most retail traders. It has only been since 2008 that the retail trader has had an opportunity to trade binary options like the so-called "masters of the universe" on Wall Street.

Logical excercises and history lessons by themselves not enough to convince you that there is no scam? Nothing wrong with due dilligence. Let us take a good look at how these brokers actually do make their money shall we?

How The Binary Options "Scam" Operates
The binary options "scam" operates in much the same way as the WalMart "scam" or the BurgerKing "scam" works. That is, by providing a product or service people want at a price above that of their expenses. Considering the misunderstanding that exists here, however, we think showing you exactly how these brokers make their money might be a good idea. It isn't too complex and we'll also construct a clarifying example.

The raw equation for a binary options brokers profit is:

Binary Brokers Profit = - [Volume Wins*Probability Of Win (ITM Payout % - 1) + Volume Losers*Probability Of Loss (OTM Payout % - 1)]
ITM = "In-The-Money" - We have a winner!
OTM = "Out-The-Money" - Better luck next time!
Probability = 0.5 in both cases in this equation (Win, or Lose. 50/50 shot in an efficient market)
For puposes of constructing our example below lets assume our hypothetical broker pays out 71% for ITM trades and 15% for OTM trades.

We'll also assume even volumes of $5,000 in winners and $5,000 in losers (equal volumes being roughly accurate in any long-run measurement).

Plugging these numbers into our equation we have:
Binary Brokers Profit = - [5000 * 0.5 (1.71 - 1) + 5000 * 0.5 (0.15 - 1)]
= - [2500 (0.71) + 2500 (-0.85)]
= - [1775 + (-2125)]
= - [ -350]
Binary Brokers Profit = +$350
So, our hypothetical binary broker would pocket a profit of $350 on trading volume of about $10,000. That may not sound like much but volumes traded is immense and these numbers get real big real quick.

Simply put, this is how the "binary options scam" operates. A simple numbers game just like every other broker or bank in out there. We can also manipulate this equation to derive from it how often we as traders need to be right with our trades to be profitable. We'll spare you the work and just give you the answer: 54.5%. Not an overly difficult disadvantage to overcome if you know what you are doing.
In conclusion we hope you can now see, and understand, why these financial instruments are just as legitimate as any other. They are simple speculative instruments which offer a unique risk/reward profile to investors. Along with the potential for great reward comes great risk and binary options trading is not for everyone. And no one should ever speculate with money they cannot afford to lose.

With that said, they can also offer an amazing opportunity for profit which is essentially unmatched anywhere else. Where else can you turn $100 into $1000 in one week with strictly limited risk as our test trader did just this past week?
Founded in March 2010, Binary Options Reviews is committed to educating a wider audience about the exiting but relatively little known world of binary options trading.


Binary Options Trading - 4 Simple Steps to Success

Binary options are fixed return options because they come with only 2 possible outcomes. It is a contract which gives the buyer a right to buy an underlying asset at a predecided fixed price within a specified time limit. The security that is being traded is known as the underlying asset and can include commodities (e.g. gold, silver, nickel, lead, and oil), currencies (USD/JPY), stocks (e.g. Apple, Microsoft, IBM) or stock indices. The price at which owner buys or sells is known as the strike price.
When trading binary options the person who is buying the underlying asset chooses call option if he is expecting a rise in the value of the security at the end of the expiry of time which may be the end of the day, week or the month. The buyer will place a call option thinking that the option price would be more than the current price at the time of trade. In vice versa the owner will place a put option if he thinks that the option price will be less than the current price. Binary option trade is the most flexible type of trade available. The trader can select the asset, predicted direction, expiry time and it can all be controlled by the owner of the security. The only thing that remains unknown is whether the asset will expire lesser or higher than the current price.

There are significant differences between binary option trading and an ordinary trading. Under ordinary trading you actually own the asset and can possess it for any time you desire. Under option trading, you are actually trading on the variances of the asset. For example, when you do option trade in Microsoft, you are actually not owning the shares of the company but making a contract whether the price of Microsoft's shares are to go up or down at the end of the expiry period. The correctness to which one can make the prediction after studying the price movement of the security can help in making profit or losses for the trader.

Binary options' trading is a common tool used by traders nowadays. Most day traders now adopt binary options trading so as to increase the profits that they earn from these trades. Simply, binary options' trading is a contract which upon the attainment of a specified condition gives a predetermined fixed amount to the trader. The amount to be paid depends on whether his contract ends "in the money" or ends "out of money". In the case were a contract ends "out of money" the trader will not receive anything at the time of expiry.

Are you interested in doubling your profits without investing more? Trade binary option is the tool that you can apply to secure maximum profits. If you are able to predict the price movements of the security of a company for a particular time period, then surely option trading is the area where you can surely succeed. Binary options trading do carry with it a high risk. But is there any trading instrument which is completely risk free? If you are able to bear the risk that is associated with options trading, the returns that you would be getting will be much more than the returns that any other trading instrument will give you.

How can we make use of the binary options to make money?
1. Trade on the most active and liquid securities: A trader should always do trade on those companies which are very active on the indices and do larger volumes of trade each day. These will be highly capitalized growth oriented companies and you can always expect their prices to go up.
2. Do the opposite if the market has risen already: In a day if you have missed out on a market rally caused by a sector a particular company, then don't feel sad. You could trade for the opposite as the prices are to settle at the end of the day.

3. Give importance for quantity than quality: The most important thing that you should consider while engaging in binary trading options is that you should consider quantity over quality of the securities. Binary options trading will offer you more return when you go for quantity of shares than to its quality. The traders need not worry about the magnitude but consider only direction of the security price.

4. Binary options trading can be used for hedging: The simplest way to make money from binary option trading is to hedge your contract. If you find before the expiry time, that the price movement is in your favour, you can hedge the contract and lock in the already made profits. To conclude, we can definitely say that binary options trading is one of the most powerful trading instrument available with us which can help in maximizing returns to the traders.


Binary Options Broker - How To Choose The Best One

Why one must use professional binary options broker?
Digital options trading is one of the most profitable investment opportunities available in the market today. Since the new market regulations announced in the year 2008, the growth of binary options trading has really catapulted and more and more people are increasing their investments into binary options. Due to the short term investments and higher returns on those investments, Digital options trading has become one of the most popular market investment opportunities.
Investors can trade 24 hours and 7 days a week in the binary options market. At the same time, there is a harsh reality behind this type of investment. One must have thorough knowledge about the current market trends to get higher returns on their investments. Plus this market is highly dynamic and volatile in nature which indicates a strong need to keep constant eyes on the latest news and worldwide market happenings. This is where a reliable and professional binary options broker platform can help investors to make easy and reliable trades automatically.

How to Choose The Best Binary Options Broker?
Due to the continuous rise in the popularity of binary options trading opportunities, there is a growing demand for reliable and professional binary options broker platforms. Unfortunately, there are several digital options scams present in the market which try to sell the investors unreliable and untested binary options broker platforms. This can cause severe losses to the traders due to the lack of professional and reliable binary trading software.

While selecting a reliable and professional digital options broker program, one must inquire about the following features and requirements that every successful binary trading software possess.

Important Binary Options Broker Features you Need to Keep In Mind
1.) Simple and intuitive user interface - Professional and reliable binary trading program offers easy and simple to handle user interface that saves lot of time and headache for traders. There is usually no need to invest extra time to learn new features and controls of the program. Most of these programs are web based and users do not need to download or update the trading software on their own PC. Users must be able to use the program easily whenever and wherever they want. User friendly and interactive controls are the most important ones which we must observe while selecting the right binary options broker platform.

2.) Ability to invest into multiple assets - Reliable and professional binary trading software offers varieties of assets for the investment purpose. A trader should be able to invest into different types of market assets from forex, indices to stocks and commodities. One must pay attention to the ability of the program to invest into all of the available market assets to gain maximum profits from the trades.
3.) Availability of appropriate expiry periods - Some binary trading brokers provide weekly expiry periods while some provide hourly and end of the day options to their investors. To gain maximum control on our trades, it is important to select the binary trading software that provides maximum expiry periods.

4.) Maximum payout percentage - Professional and popular digital options brokers provide maximum payout percentage to their investors. One must look at the binary trading platform that can offer minimum 75% to 90% payout percentage for every won and lost investment. For every unsuccessful trade, there must be minimum 5% to 10% returns to the traders.

5.) Varieties of languages offered - To become more convenient with the usage of the binary trading software, it is essential that the language of the program must be your own mother tongue. There are some professional binary options broker platforms in the market that offer varieties of languages from English, Arabic, Spanish, Russian, Turkish, etc.

6.) Minimum initial deposit requirements - One must be able to open binary trading account at the website for free and no need to provide initial deposits. Look for those binary trading platforms that provide free registrations and minimal deposits.

7.) Varieties of payment options - Professional binary options trading platforms provide varieties of payment methods such as Paypal, bank transfer, credit card, etc. Look for such binary or digital options broker that offer multiple forms of payment withdrawal options.

8.) Higher bonuses - Some digital options broker offer up to 25% bonuses to their traders that also depend upon total turnover and initial deposit amount from the traders. Look for such trading platforms that offer higher bonuses to their users.

9.) Top notch customer support - High quality customer service is equally important to get timely support and assistance during all types of trades. Professional digital trading brokers and platforms always provide customer support in varieties of languages and via multiple platforms such as email, live chat, and telephone support.

Still Not Sure Which Broker to Choose For Your Digital Options Business?
If you are looking for a reliable and profitable binary options broker then you must read the binary options broker comparison in between the best binary trading platforms first. Visit our website today to compare popular binary options broker platforms available in the market.

Article Source: